What do Diamonds and Stamps have in common?

They are both “forever”.

The US Postal Service (USPS) announced that, starting in 2011, all new first-class stamps will be FOREVER stamps. I’ve been arguing for this long before the first FOREVER stamp, probably since about 2001, when I saw the use of such stamps in the UK firsthand. Usually, I claim that no one ever listens to me[1]. Not today.

This policy has several advantages:

  1. Savings from not having to print new first-class stamps with every rate hike.
  2. Savings from not having to print low value stamps needed to make pre-hike stamps compliant with post-hike rates.
  3. Savings from not having to return mail with inadequate postage due to incorrect use of pre-hike stamps.
  4. In the expectation of future rate hikes, customers may hoard stamps[1] encouraging increased revenue when the USPS needs it.
  5. Not looking like a jerk for unpredictably changing the terms of the service (first-class mailing) for a price agreement with your customers represented by the stamp.
  6. Not looking like a jerk for imposing the inconvenience of acquiring and using low value stamps on your most loyal customers.

Lest you think that my fondness for “non-denominated postage” was selfish (i.e., I was sitting on a hoard of first-class stamps during a rate hike), I would point out that I am under 70, know how to use the internet, and only use regular mail when mandated by law; in summary, my stamp consumption is ~3 per annum.

NOTES

  1. If your customers are rational[2], they will buy in bulk right before a rate hike when inflation has minimized the value of the cash used to purchase the stamp. Normally, inflation means the value of money falls as prices increase (i.e., X amount of money buys less goods). Since the stamp price is fixed between rate hikes, the opportunity cost of spending money on stamps (X money buys same number of stamps) instead of other goods is minimized (X money buys fewer goods). This could mean increased revenue right when it is needed most, since the USPS increases its prices less in response to the market, but to cover budget deficits. It also will mean that rate hikes need to be pegged to inflation as well as operational cost changes.
  2. Which we know they aren’t, because they are using the post office.

Author: Josh Witten

http://www.thefinchandpea.com

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